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Good morning and welcome to Europe Express. The spat between the US and the EU over vaccine patent waivers will probably persist after being given extra impetus by the bloc’s leaders over the weekend. Low- and middle-income countries can only watch the quarrel with dismay while their demands for vaccines remain unmet. We will come back to this in a minute.
Several big beneficiaries of the EU recovery fund have submitted their spending plans, and our Chart du jour reveals how Italy, France, Spain Greece compare in terms of grants and loans. Norway, meanwhile, is due to receive advice on whether to join Denmark in ditching both the Oxford/AstraZeneca and Johnson & Johnson vaccines.
We will also look at why the EU’s attempt at direct democracy — the Conference on the Future of Europe — is off to a rocky start.
The international debate about vaccine patents is in danger of descending into a transatlantic tiff that distracts from the pressing need to provide poorer countries access to life-saving jabs, writes Brussels correspondent Mehreen Khan.
At their Porto summit this weekend, EU leaders hit back at a surprise call from the Biden administration for temporary waivers on vaccine patents to help drugmakers in poorer countries ramp up supplies in the face of deadly virus variants. Here is the FT’s take on how the EU sought to turn the tables on US president Joe Biden.
France’s Emmanuel Macron led the charge with caustic criticism of “Anglo-Saxon” countries that he accused of blocking exports of vaccines and vital materials. While declaring openness to discussing the merits of vaccine waivers, EU chiefs Ursula von der Leyen and Charles Michel stressed the need to boost exports from the richer countries — a cause they said the EU has led.
EU officials privately think the US shift sounds like a PR stunt to position Washington as a benevolent force in the international vaccines debate. The US did not consult or try to co-ordinate their announcement with Brussels, EU officials said, leaving the bloc snookered in its own public response.
Brussels thinks patent waivers — which have been demanded by India and South Africa at the World Trade Organization since late 2020 — are a distraction from more pressing policies that can quickly ramp up supply.
The patent spat lay bare a trifecta of crises: Covid-19, WTO governance and the intellectual property regime, according to Jayashree Watal, a former senior WTO official specialising in patents. Speaking to Verfassungsblog.de, she explained why she did not believe a waiver can help: in order for the novel mRNA technology to be replicated safely, the vaccine inventors would have to co-operate with generic drug manufacturers. And that is not a given.
This is also a reason why the EU wants to refocus the debate on granting wider licensing to drugmakers to produce existing jabs and pressuring the US to start exporting more vital materials.
Deliveries by Covid-19 Vaccines Global Access — or Covax — have reached only about 60m doses, compared with the initiative’s 250m target by the end of May. Covax is mainly using the AstraZeneca vaccine, produced in South Korea and India. But given the terrible effect of the second wave in India, local authorities in March decided to halt exports, which led to a significant drop in Covax shipments.
The US has pledged $4bn to Covax, but has exported hardly any vaccines produced on its soil. Meanwhile, according to von der Leyen, around 50 per cent of vaccines produced in Europe have been exported to almost 90 countries. The EU has also pledged €2.5bn to the Covax initiative.
The spat is another strain on what was supposed to be a revamped EU-US relationship built on trust and co-operation after the turbulence of the Trump years.
But Biden has already shown that the return of US leadership on the world stage in areas from international taxation, climate change and now vaccines means setting the agenda and waiting for the rest — including Europe — to follow. The golden age of western multilateralism was ever thus.
Chart du jour: Recovery boost
The impact of the EU recovery fund will probably be more fully included in the commission’s economic outlook due on Wednesday. Economists think the borrowing programme could deliver a healthy boost to the bloc’s economic prospects. (Find out more here)
Norway will decide this week whether to follow Denmark’s lead and drop both the AstraZeneca and J&J jabs from its Covid-19 vaccine programme following several blood clot deaths, writes Richard Milne, our Nordic and Baltic correspondent.
Denmark has already excluded both jabs and is only using those from BioNTech/Pfizer and Moderna that rely on mRNA technology. Sweden meanwhile decided to donate 1m of its AstraZeneca doses to the Covax facility.
There were mixed messages from the rest of Europe: Germany last week expanded the use of AstraZeneca to all adults while the UK stopped it from being taken by those under 40. The European Commission has already seen the way the wind was blowing and after 2021 looks set to order only mRNA jabs.
Norway’s public health authority last month recommended that the country drop AstraZeneca after four people died in the Scandinavian country from the rare combination of blood clots and low level of platelets.
The government in Oslo was so worried about the implications and what it would mean for the J&J jab — which relies on similar technology — that it ordered an expert commission to look into the risks and report back by today.
The commission, which is made up of 13 academics and health professionals from Norway and Europe, will present its report at a press conference this morning, with the government expected to make its mind up later in the week.
Erna Solberg, the centre-right prime minister, summed up why Norway might drop both jabs at the FT’s Global Boardroom event last week, when she said it would be “intolerable” if more people died from vaccines than from the pandemic.
Macron’s pet project
The Conference on the Future of Europe was finally launched yesterday in Strasbourg, with limited fanfare but relief that the long-awaited exercise is actually happening, writes Mehreen Khan.
Emmanuel Macron was front and centre to cut the red ribbon on the Conference, a brainchild he first devised in the aftermath of the European elections in 2019.
Already a year overdue, the Conference’s ambitions have been severely downgraded since Macron announced his desire for a Convention style format that would help “define Europe’s strategy for the next five years, including changes to the Treaties”.
The pandemic has proven to be the enemy of the will for EU reform. Europe’s governments, including France, have shown no appetite for institutional change as they gear up for a crucial period of post-pandemic economic rehabilitation. Any steps toward treaty change have already been ruled out.
Yesterday’s launch was itself almost canned over divisions between the European parliament, commission and member states on what the exercise is meant to achieve and the role citizens should play in it. Last week, MEPs claimed victory after they managed to ensure that the final results of the exercise won’t be drawn up by a handful of technocrats, but done in consultation with parliamentarians and citizens.
The outcome and purpose remain unknown but the format is certainly novel. The Conference will involve 108 randomly selected citizens, 108 national parliamentarians, 54 government representatives and three commissioners. Citizen involvement will be done largely online using a multilingual platform where participants can contribute ideas and priorities for EU reform. The Conference will run for less than a year, so Macron can produce the results during the French EU council presidency next spring.
For some, such as the commission, the involvement of citizens makes the Conference a worthwhile exercise even if it produces no tangible results.
But there are already fears that those taking part will not be representative of the EU as a whole. Though randomly selected, the absence of criteria to ensure racial, religious or ethnic diversity among the chosen participants risks “excluding already marginalising communities”, warned Citizens Take Over Europe, a grassroots organisation.
Three things to watch today
Valdis Dombrovskis and Paolo Gentiloni of the European Commission take questions from members of the European parliament on the Resilience and Recovery package
EU foreign affairs ministers meet in Brussels
Russian dissident Mikhail Khodorkovsky appears in front of the EU parliament’s special committee on foreign interference and disinformation
. . . and later this week
The commission presents its economic outlook on Wednesday
The EU’s General Court rules on Margrethe Vestager’s state aid decisions against Amazon and Engie on Wednesday
Finland’s parliament votes on the EU own resources decision needed to fuel the bloc’s recovery fund
Europe’s football governing body has agreed a peace deal with the majority of clubs behind a botched attempt to launch a breakaway Super League. (More here)
During their summit in Porto, EU leaders restarted trade talks with India.
Parties backing a second independence referendum won an increased majority of seats in the Scottish parliament, with First Minister Nicola Sturgeon saying that the referendum was a “matter of fundamental democratic principle”.
Romania sped up its vaccination campaign over the weekend, setting up new centres across the country including at the Dracula castle in Bran — complete with a vampire-themed ad campaign.
Vaccine cocktails cause headaches for Italy’s government
Buongiorno and welcome to Europe Express.
Italian cocktails such as the Aperol Spritz are being enjoyed in many European capitals these sunny days, but mixing Covid-19 shots is proving a recipe with potentially toxic effects for the government of Mario Draghi. We will explore why recent flip-flops on this latest vaccination trend are dominating the political debate in Italy.
Sticking with toxic politics, an en masse resignation at the Oslo city council has highlighted the difficulties even respectable Nordic oil producing countries face in working out how to meet their international climate obligations.
As for the EU’s stalled Banking Union, the ball did not move yesterday because of multiple differences between eurozone finance ministers gathered in Luxembourg. Eurogroup chief Paschal Donohoe, who has been trying to land a “work plan” setting out how to advance the complex initiative, said it would take more time to agree the plan between member states and that he would return to the matter later this year. Here is a full rundown of why the project remains blocked.
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Toxic cocktail recipe
Mixing Covid-19 vaccines risks turning into a toxic cocktail recipe for Mario Draghi’s government, as an increasing number of Italians begin to shun immunisation, writes FT Milan correspondent Silvia Sciorilli Borrelli.
Italian authorities last week banned the Oxford/AstraZeneca vaccine for people younger than 60. At the same time, they sought to impose mRNA jabs, such as BioNTech/Pfizer and Moderna, as the second dose for almost 1m people who had already received a first dose of the vaccine.
Both moves were prompted by the death of an 18-year-old woman (who allegedly suffered from low blood platelets) from a rare form of blood clot two weeks after receiving her first AstraZeneca dose.
But this latest change in guidelines sparked panic among the public, with thousands of people cancelling their vaccination appointments. Adding to the public scare was Marco Cavaleri, a senior European Medicines Agency official, who was misquoted in Italian media as saying that the AstraZeneca jab should be banned altogether.
The EU regulator reiterated this week that the advantages of the AstraZeneca vaccine outweighed the risks for all age groups.
Nevertheless, the Italian government has come under fire for failing to restrict it for younger people earlier and for continuing to give the public mixed messages on a vaccine that has been discontinued in several European countries and was banned for certain age groups in others months ago.
The idea of an obligatory cocktail of vaccines was met with strong opposition in Italy, where several regional governments signalled that they would not follow Rome’s orders and vowed to offer citizens an option for their second dose.
Yesterday, after an increasing number of people refused the vaccine cocktail and with only 24 per cent of the population fully immunised, officials in Rome suggested Italy might follow the “Spanish model.” Under that policy, people can still opt to receive their second AstraZeneca dose regardless of their age after signing a liability waiver in case of adverse effects.
France has also approved mixing the AstraZeneca and mRNA vaccines for people under the age of 55, but it is not mandatory and applies to a smaller proportion of the population than in Italy.
Franco Locatelli, head of the health council, insisted preliminary studies showed mixing vaccines boosted the immune system’s response.
However, preliminary findings of a study published in The Lancet last month showed the vaccine cocktail amplified common side effects and therefore “might have some short-term disadvantages”.
The absence of unambiguous data on the effects of mixing led Italian commentators to harshly criticise the government’s decision and its poor communication on the AstraZeneca jab’s limitations.
Several analysts and politicians also claimed that the media had been sympathetic to Draghi’s government and the Covid-19 commissioner he installed, whereas the former prime minister, Giuseppe Conte, would have been “torn to pieces” had the same situation materialised.
Italy’s decision to set up vaccination “open days” — where people as young as 16 could show up without a booking to be immunised with any vaccine available — also came under fire domestically and abroad.
How would you feel about being inoculated with two doses of different Covid-19 vaccines? Take our poll here.
Chart du jour: Inflation extremes
The European Central Bank’s governing council meets on a hillside in Frankfurt today, with inflation targets one of the big issues on their agenda. Figures released for May showed inflation was on the rise across most of Europe, with Luxembourg recording an increase of 4 per cent. At the opposite end, Greece, hampered by low tourism numbers, is still recording negative inflation.
Norway’s Greens vs Big Oil
A fierce and sometimes surreal controversy has felled Oslo’s entire government, giving a taste of some of the debates that are likely to resurface in national elections in September, writes Richard Milne, FT Nordic and Baltic bureau chief.
The entire centre-left Oslo city council resigned in protest on Wednesday after a vote of no confidence in Green politician Lan Marie Berg, because of her failure to disclose a huge cost overrun in a new water pipeline for Norway’s capital.
Berg is one of the most polarising politicians in Norway, as her outspoken attacks on petrol cars and more have drawn a torrent of criticism, some of it heavily misogynistic and racist.
She is running for Norway’s national parliament in elections on September 13 that the centre-left opposition — of which her Green party is part — are on track to win.
But the controversy surrounding her underscored the difficulties that Norway, western Europe’s biggest petroleum producer, is experiencing in working out how to meet its climate obligations.
The International Energy Agency warned last month that there should be no new oil and gas exploration to reach the Paris agreement goal of limiting global warming to 1.5C more than pre-industrial levels. But Norway’s main centre-left Labour party and ruling centre-right Conservatives have shown no desire to call time on the country’s oil industry.
The Greens have said they would not support any government that continues with oil exploration, but it is far from clear whether the party will gain enough votes to enter parliament. Many Norwegian voters appear put off by their tough rhetoric, with the Centre party — rivalling Labour as the biggest centre-left group — defending diesel cars popular with their mostly rural supporters.
The surreal aspect of the events in Oslo is that the same centre-left government is likely to be reborn without Berg, who wants to focus on her parliamentary run. That led the Centre party to accuse her of self-indulgence for not simply resigning and sparing the capital the spectacle of high political drama in the midst of a pandemic. It also demonstrated the divisions within Norway’s centre-left and the difficulties they could have in forming a coherent national government should they win in September.
What to watch this weekend
Brexit commissioner Maros Sefcovic gives a speech today at the College of Europe on the EU’s post-Brexit relations with the UK
The Conference on the Future of Europe holds its first plenary session tomorrow in Strasbourg
WFH future: Remote working is here to stay, with a majority of European office workers preferring it to the old way of going in to the office. A policy paper by Bruegel suggests the EU should set up a regulatory framework for hybrid working.
Gig workers: Self-employed, in fierce competition for orders, without social protection and subject to algorithmic bias — this is the experience of most delivery service workers in Europe. The Centre for European Policy Studies has published a report about the situation of digital platforms workers in all 27 EU countries over the past five years.
Flying green: FT travel editor Tom Robbins writes about his experience onboard the world’s fully electric two-seat plane, which was recently certified for commercial use in the EU market.
Axe the G7: A week after the G7 summit in Cornwall, economist Jeffrey Sachs argues that the format is outdated and consistently fails to deliver results — and should therefore be consigned to the history books. (PS)
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The links with Tai that Brussels hopes will bind
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Hello from Brussels, where the barbed-wire barricades have been cleared away, the buses are back running on their usual routes rather than being diverted around the centre and in general the city has the typical morning-after feeling that follows a visit from the US president. Today’s main piece looks at what Joe Biden’s trip to Brussels actually meant for trade, while Charted waters delves into the nature of the trading relationship between the two jurisdictions.
Warm words now, but a cold reality awaits
And so the US presidential procession leaves behind, certainly in Brussels trade circles, a profound sense of relief that they are dealing with the personable and constructive Joe Biden and Katherine Tai rather than the abrasive and frequently toxic Donald Trump and Robert Lighthizer.
The big victory was the Airbus-Boeing deal after a mere 17 years of World Trade Organization litigation, not just in itself but for what it said about the possibilities of constructive engagement. Tai, the US trade representative, told a media roundtable in Brussels on Tuesday: “This was a test of our relationship and our ability to build confidence and trust.” However, as Trade Secrets wrote yesterday, it’s not a given that an ad hoc make-it-up-as-you-go-along approach will work between two economies and their aircraft manufacturers, which still have serious problems with each other’s subsidy models.
In fact, if you had to sum up the entire encounter, it was that while leaders and officials luxuriate publicly in a rhetorical hot tub of co-operation and mutual appreciation, they still need to pass through a cold shower of political and legal reality on the way to the changing rooms.
Having China as a rival in common is certainly a useful bonding experience and framing device. The Airbus-Boeing deal was portrayed as a joint response to the rise of aircraft manufacturers in non-market economies. Similarly, the US pledge to fix the “Section 232” national security tariffs on EU steel and aluminium that the Biden administration inherited from Trump was put in the context of global overcapacity driven by Chinese (and others’) steel production.
Still, when it comes to a choice between irritating an ally such as the EU (and possibly breaking international law) and disappointing a politically powerful domestic constituency such as the steel industry, which likes the tariffs, the Biden administration has so far chosen the former.
Plans to remove existing transatlantic irritants remain either fragile or aspirational. The Airbus-Boeing subsidies have been suspended but not abolished. Tai said on Tuesday: “We have pivoted to co-operation and collaboration, but it is going to be helpful to have the ability to bring these tariffs back to keep each other honest.” In other words: trust but verify, agree a ceasefire but do not disarm.
On the Section 232s, which are supposed to be fixed by the beginning of December, Tai said: “There are hard questions that we have to face and deep feelings that we’re going to have to address . . . we’re going to push ourselves and our partners in the EU for an outcome that is going to be good for our relationship, for our industries, for our economies, for our workers”. If you believe the zero-sum logic of protectionism, there may be some difficulty in addressing all those goals at once.
There are mysterious nose-tapping “wait and see” noises from both sides about how they might punch enough of a hole in the 232 tariff wall to let some European steel and aluminium into the US without alienating blue-collar workers enough to hand the Midwest to the Republicans. But it’s going to be technically and politically difficult to get that done in less than six months.
As for the WTO itself, certainly the Biden administration pleased the EU and others by moving quickly in its early weeks to unblock the appointment of Ngozi Okonjo-Iweala as director-general. But that wasn’t politically costly: only isolationist headbangers in US politics and business really want to destroy the institution. Asked on Tuesday about the prospects for reviving the WTO’s at-present paralysed appellate body, long disliked by the US steel industry for ruling American antidumping duties illegal, Tai said: “I’m definitely not answering that.”
The goodwill certainly sounds like it’s there. Every utterance on both sides was suffused with the rhetoric of co-operation. Tai even went out of her way to praise the EU for its submission to the WTO on the vaccine IP issue which, unlike the US stance, does not call for a patent waiver.
On that subject, incidentally, while declining to rule out the US itself submitting a negotiating text, she said: “I think that we have a unique ability in the WTO on this issue to be a facilitator, to have credibility with the different sides”. This strengthens our view that the US is far happier to get the good PR from supporting a waiver in principle than to stick its neck out by taking a position in the talks.
Whatever the vibe, the Biden administration is overwhelmingly focused on its domestic economy and maintaining political support, and the EU doesn’t have any votes in the next year’s US midterm elections. We’ll watch the outcomes with interest but without great confidence that everything will get fixed in short order.
We’ve written about the diplomatic relationship, but what about trade between the EU and US itself? As the chart below shows, the two have a tight — and increasingly important — relationship. The EU’s surplus has grown slightly of late, though by a smaller factor than the growth in total values of traded goods.
In terms of industries, here’s a breakdown of the most valued ones for the EU. The importance of machinery and transport equipment goes some way to explaining why Trump’s threat of tariffs on the car industry did so much to rile lawmakers here. Claire Jones
A round-up of stories from the Financial Times this morning. As jurisdictions get tougher on due diligence, lawyers are helping companies clean up their supply chains. We also have an opinion article, which pushes for a global consensus on how to stress test supply chains. This follows calls from the US — wise in our view — to set up a global forum for supply chain resilience. New Zealand wants to agree trade deals with the EU and UK this year in an attempt to become less reliant on China.
Many countries have imposed sanctions on Myanmar following the military coup earlier this year. Not so Moscow. Nikkei ($) reports that Russia’s rolling out of the welcome mat for Myanmar’s air force commander was a cue to the junta that its arms will flow to the south-east Asian nation.
Bloomberg ($) has a piece on European car sales failing to recover to pre-pandemic levels. We think this may have something to do with chip-induced supply shortages. In the meantime, the price of used cars has surged. Alan Beattie and Claire Jones
Biden warns Putin of ‘devastating’ fallout if activist Navalny dies in jail
Joe Biden warned Vladimir Putin that there would be “devastating” consequences for Russia if opposition activist Alexei Navalny were to die in prison after “open” and “frank” talks aimed at stabilising relations between the two countries.
In their first face-to-face meeting as leaders, the presidents agreed to begin bilateral talks on preventing cyber attacks, restart talks on arms control, restore their ambassadors to their respective embassies and explore a potential exchange of citizens held in each other’s prisons, Putin said.
Billed as a meeting riddled with difficult topics and mutual grievances, Putin told reporters following talks that lasted three and a half hours that there was “no hostility” and the conversation was “efficient . . . and constructive”.
“This was a productive meeting,” Putin said. “It was fruitful. It was to the point, and it took place in an atmosphere that was enabling . . . it gave us glimpses of confidence and hope.”
Putin praised Biden’s moral qualities and described his approach as pragmatic and well balanced, but said it was “hard to say” whether relations would improve as a result.
Biden told reporters he had handed Putin a list of “certain critical infrastructure [that] should be off limits” from cyber attacks, which comprised 16 entities including the energy sector and water systems.
“I said: ‘How would you feel if ransomware took down the pipelines that run from your oilfields?’” Biden said.
But he echoed Putin’s comments about the tone of the meeting, which he said was “good, positive . . . There wasn’t any strident action taken.”
He added that he raised the issue of Navalny’s detention with Putin and what would happen if the activist died in prison. “I made it clear to him the consequences of that would be devastating for Russia.”
Navalny was arrested and sentenced to prison recently after returning to Russia. “Human rights is always going to be on the table,” Biden said.
Putin had answered questions about Navalny by saying that he had broken Russian law and knew he would be jailed if he returned to Russia, and claimed that his political activity was seeking to weaken Russia.
The meeting started at about 1.30pm local time with a handshake between the two leaders at the 18th-century Villa La Grange by Lake Geneva, and ended just after 5pm, more than an hour earlier than aides had predicted.
Cyber warfare was one of the biggest irritants before the summit, following a major hack of US government agencies last year by Russia-based groups, and alleged disinformation campaigns in the US by Moscow-backed organisations.
Biden had described Putin as a “worthy adversary” ahead of the meeting and said he was going to clarify to the Russian leader “what the red lines are”. Russia was seeking to drive a wedge in transatlantic solidarity and the US was experiencing an increase in malicious cyber activity, Biden added. He promised to respond in kind if necessary.
“We believe cyber space is extraordinarily important in general and in particular for the US, and to the same extent for Russia,” Putin told reporters.
The agreed bilateral government talks on cyber security will be a first for the US and Russia, and have previously been resisted by Washington.
Biden and Putin also grappled with a long list of accusations, complaints and charges against one another, including alleged Russian meddling in US elections, US sanctions against Moscow and the Kremlin’s misgivings over Nato military expansion in eastern Europe.
Other difficulties in the relationship are torn-up arms control agreements and war in Ukraine.
Biden travelled to the Swiss city after a week in Europe meeting G7, EU and Nato allies. The response to threats posed by Russia was continually raised in talks with western leaders. The EU warned in a foreign policy paper on Wednesday of a “negative spiral” in EU-Russia relations.
The US president said world leaders had thanked him for holding the summit, which some analysts have criticised as handing Putin a diplomatic victory.
Biden said at the outset of the meeting: “As I said outside, it is always better to meet face-to-face to try to determine where we have mutual interest; co-operate, and where we don’t, establish predictable and rational” relations. He added: “Two great powers.”
Putin said that his ambassador would return to Washington, and the US ambassador would return to Moscow following the talks.
The respective diplomats left their posts earlier in the year after a chain of events prompted by Biden agreeing with an interviewer that Putin was a “killer”.
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